Inventory systems with uncertain supplier capacity: an application to covid-19 testing

The COVID-19 pandemic has forced governments to impose crippling restrictions on the day-to-day activities of citizens. To contain the virus and lift these restrictions safely, policymakers need to know quickly where the virus is spreading. This has been possible only through widespread testing. Not long after starting largescale testing in the early stages of the pandemic and more recently with a surge of new variants, countries hit a roadblock—the shortage of swabs used in the testing kits due to disruptions in the supply chain caused by COVID-19. This disruption translates to a variable production capacity of the swab suppliers. As a result, when countries order swabs from a swab supplier, their order might not be fully satisfied. Hence, adopting a proper swab inventory management model can help countries better manage COVID-19 testing and avoid widespread shortages of testing supplies. By considering two different swab demand patterns (i.e., stationary and stochastic) and two different production capacity scenarios for the swab supplier (i.e., ample and variable production capacity), we develop four analytical models, in which we consider all combinations of the above demand and capacity scenarios, to derive the optimal swab-procurement policy for a country. Given the rapid change of COVID-19 infection cases and the limited planning period, countries should aim for reactive scheduling. Through a comprehensive numerical study, we also provide guidelines on how countries should optimally react to these changes in the supply and demand of swabs. The research implications for managing inventory with stochastic supplier capacity and uncertain demand in a finite time horizon extend well beyond the application to COVID-19 testing.